In this edition of Business Law Focus, Editor Evan Pickworth unpacks the broad ramifications of the Political Party Funding Act with leading expert, Dario Milo from Webber Wentzel.

The act came into force on April 1 2021 and contains several provisions compelling the disclosure of contributions to political parties, but certain loopholes remain.

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The Political Party Funding Act marks a significant milestone in SA’s democracy, after a decade of nongovernmental organisations urging the regulation of private donations.

The objectives of the act are to:

  • Provide for, and regulate, the public and private funding of political parties, in particular;
  • Establish and manage funds to finance represented political parties sufficiently;
  • Prohibit certain donations from being made directly to political parties;
  • Regulate the disclosure of donations accepted;
  • Determine the duties of political parties in respect of funding;
  • Provide for powers and duties of the commission;
  • Provide for administrative fines, and
  • Create offences and penalties.

The act regulates direct donations made to political parties and does not allow political parties to accept direct donations from an individual or entity of more than R15m.

Indirect donations made to the Electoral Commission of SA (IEC) are also permitted under the act. Money appropriated by an act of parliament or recovered by the IEC in terms of the act and interest from investments in terms of the act must be allocated by the Represented Political Parties Fund. 

Private donations received by the IEC must be allocated by the Multi-Party Democracy Fund.  These allocations are made by the respective funds to political parties in national and provincial legislatures based on a proportional and equitable formula.

The IEC is tasked with monitoring compliance with the act, assisted by various provisions in the Political Party Funding Act. For example, political parties must disclose the relevant information, including books, records, reports and other documentation needed for any investigation by the IEC under the Act. The IEC may apply to the Electoral Court for an order to direct parties to comply and for administrative fines to be imposed.

The IEC is currently developing an online disclosure system that will allow both political parties and donors to make disclosures electronically.

The IEC’s powers to enforce compliance include:

  • Withholding the distribution of funds from the Represented Political Party Fund and Multi-Party Democracy Fund; and
  • The recovery of money irregularly accepted or spent; and
  • Imposing administrative fines (via the Electoral Court).

The Act has certain limitations, however:

  • Companies that donate to the Multi-Party Democracy Fund may request that they and the amount of their donation remain anonymous;
  • Small private donations remain unregulated, because a juristic person and political party are only obligated to disclose donations of more than R100 000 from a single source;
  • Only juristic persons have the duty to disclose a donation of more than R100 000 to the IEC, not natural persons. That means a rich businessman who donates does not have to disclose but a company does. Although the political party would still have to disclose the businessman's donation, it would be better if the disclosure was made by both parties;
  • The definition of “donation in kind” includes the provision of services for the use or benefit of a political party other than on commercial terms. “Commercial terms” is not defined and could give rise to potential loopholes.

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